Treasury, FDIC Said to Consider Guarantees to Stem Foreclosures

Bloomberg – The U.S. Treasury and the Federal Deposit Insurance Corp. are considering a program that may offer about $500 billion in guarantees for troubled mortgages to stem record foreclosures, people familiar with the matter said.

The plan, which might put as many as 3 million homeowners into affordable loans, would require lenders to restructure mortgages based on a borrower’s ability to repay. Under one option, the industry would keep lower monthly payments for five years before raising interest rates, the people said.

FDIC Chairman Sheila Bair mentioned the program at an international deposit insurers conference in Arlington, Virginia, yesterday without offering details. “A framework is needed to modify loans on a scale large enough to have a major impact,” Bair said.